Principles You Should Know About Which Govern The Buying And Selling Of Property In The UK
When you purchase or sell property, make use of an estate agent, or enter into a mortgage, the principles of contract and agency come into play.
Yup, you know what a mortgage loan is, right? A mortgage has at least two sides to it - you, the borrower looking for money to buy a property, and the lender, providing the means by which you can buy the home of your dreams.
Yes, no difficulties there. But the process of buying a property and obtaining a mortgage both involve contracts. Yes they surely do. You and the seller of the property. You and the lender providing the mortgage.
Hence, the contract in its simplest form requires at least two, with each of the parties bound by legal requirements and rules.
And underpinning the legalities and rules are the principles of contract and the principles of agency. It really is worth understanding both of these.
The principles of contract are quite easy to grasp. At its simplest, a contract is a legal arrangement which two or more people agree to enter into.
As well as involving two people, a contract also implies that something is given by one side and accepted by the other party. Legal obligations are put on both as a result.
The 'something' that is given is known in legal circles as a consideration. Kind of old world? In terms of property, the buyer's consideration is cash, which he or she hands over. The seller's consideration is, of course, the property.
You would certainly be right in assuming there is much more to this than the number of parties involved and the parting with a consideration.
There are a couple more bits and pieces that must be met - even before either of the parties gets involved. We are referring to the capacity to enter into a contract in the first place.
The rules are easy. First you've got to be 18 or older. Then you have got to be legally able to buy, or sell, the property. You, and of course the other party to the deal, must be both of sound mind.
A thruthful approach is another consideration, hence the idea of utmost good faith.
So if one side asks a question of the other side then a truthful reply is expected.
No ifs or buts, this is extremely important when it comes to any dealings in property. The buyer's solicitor will almost certainly ask at least one or two probing questions as a matter of routine. That's simply because so many issues can have an effect on a property's value - disputes with neighbouring property owners, for example, or environmental factors.
Any less-than-truthful answer could, at a date in the future, result in some kind of legal repercussions. The Truth truly is the best policy.
Now let's take a peek at the principles of agency because often an estate agent is employed by the property seller. The job of the estate agent is to advertise the property and therefore to bring in a line of potential buyers.
So there's a relationship between estate agent and property seller, which is where the principles of agency come into their own. This involves an agent on one side of the fence and the principal on the other - the agent being the estate agent, and the principal the seller.
The principles of agency make it clear that under the law, any actions taken by the agent are deemed to be those of the principal.
Of course, that is a rather simplisitc explanation and in the real world the situation is very likely to be much more complex. However, in terms of our estate agent, his or her role might be nothing more than passing on any offers to the seller.
Other sorts of agency may often be more complicated because the agent has been given powers, i.e. authority, to make decisions without consulting first with the client.
This might often be the case with an IFA (independent financial adviser) and their client. The IFA might have been given authority to take action independently with regard to, for example, investment decisions. However, any such action will fall within parameters already agreed.
However, no matter what the depth of the relationship between agent and principal, conditions of the agency should without exception be set out in writing prior to any action by the agent.
That way, both agent and principal know exactly where the lines are in the relationship right from the word go.
Of course, as in many other areas of everyday life, the principles of agency may become a little bit more complex.
There may be situations where the action of the principal appear to give the agent authority far beyond any previously agreed limits.
This apparent authority only serves to legitimise the actions taken by the agent, despite those actions being well outside the parameters agreed at the commencement of the relationship.
Agents are human and sometimes they can go a little bit too far, acting outside their remit either intentionally or by accident. The principal might then take some legal course of action.
Or the principal can retrospectively agree that the action taken by the agent was indeed acceptable. Commonly known as ratification, the principal ratifies the action of the agent after the event.
This has been an extremely short article dealing with the highly complex areas of the principles of contract and the principles of agency. Both are well worth bearing in mind when either buying or selling property in the United Kingdom.
Yup, you know what a mortgage loan is, right? A mortgage has at least two sides to it - you, the borrower looking for money to buy a property, and the lender, providing the means by which you can buy the home of your dreams.
Yes, no difficulties there. But the process of buying a property and obtaining a mortgage both involve contracts. Yes they surely do. You and the seller of the property. You and the lender providing the mortgage.
Hence, the contract in its simplest form requires at least two, with each of the parties bound by legal requirements and rules.
And underpinning the legalities and rules are the principles of contract and the principles of agency. It really is worth understanding both of these.
The principles of contract are quite easy to grasp. At its simplest, a contract is a legal arrangement which two or more people agree to enter into.
As well as involving two people, a contract also implies that something is given by one side and accepted by the other party. Legal obligations are put on both as a result.
The 'something' that is given is known in legal circles as a consideration. Kind of old world? In terms of property, the buyer's consideration is cash, which he or she hands over. The seller's consideration is, of course, the property.
You would certainly be right in assuming there is much more to this than the number of parties involved and the parting with a consideration.
There are a couple more bits and pieces that must be met - even before either of the parties gets involved. We are referring to the capacity to enter into a contract in the first place.
The rules are easy. First you've got to be 18 or older. Then you have got to be legally able to buy, or sell, the property. You, and of course the other party to the deal, must be both of sound mind.
A thruthful approach is another consideration, hence the idea of utmost good faith.
So if one side asks a question of the other side then a truthful reply is expected.
No ifs or buts, this is extremely important when it comes to any dealings in property. The buyer's solicitor will almost certainly ask at least one or two probing questions as a matter of routine. That's simply because so many issues can have an effect on a property's value - disputes with neighbouring property owners, for example, or environmental factors.
Any less-than-truthful answer could, at a date in the future, result in some kind of legal repercussions. The Truth truly is the best policy.
Now let's take a peek at the principles of agency because often an estate agent is employed by the property seller. The job of the estate agent is to advertise the property and therefore to bring in a line of potential buyers.
So there's a relationship between estate agent and property seller, which is where the principles of agency come into their own. This involves an agent on one side of the fence and the principal on the other - the agent being the estate agent, and the principal the seller.
The principles of agency make it clear that under the law, any actions taken by the agent are deemed to be those of the principal.
Of course, that is a rather simplisitc explanation and in the real world the situation is very likely to be much more complex. However, in terms of our estate agent, his or her role might be nothing more than passing on any offers to the seller.
Other sorts of agency may often be more complicated because the agent has been given powers, i.e. authority, to make decisions without consulting first with the client.
This might often be the case with an IFA (independent financial adviser) and their client. The IFA might have been given authority to take action independently with regard to, for example, investment decisions. However, any such action will fall within parameters already agreed.
However, no matter what the depth of the relationship between agent and principal, conditions of the agency should without exception be set out in writing prior to any action by the agent.
That way, both agent and principal know exactly where the lines are in the relationship right from the word go.
Of course, as in many other areas of everyday life, the principles of agency may become a little bit more complex.
There may be situations where the action of the principal appear to give the agent authority far beyond any previously agreed limits.
This apparent authority only serves to legitimise the actions taken by the agent, despite those actions being well outside the parameters agreed at the commencement of the relationship.
Agents are human and sometimes they can go a little bit too far, acting outside their remit either intentionally or by accident. The principal might then take some legal course of action.
Or the principal can retrospectively agree that the action taken by the agent was indeed acceptable. Commonly known as ratification, the principal ratifies the action of the agent after the event.
This has been an extremely short article dealing with the highly complex areas of the principles of contract and the principles of agency. Both are well worth bearing in mind when either buying or selling property in the United Kingdom.